HOHHOT, April 5 (Xinhua) -- Chinese coal enterprises
have made strides in coal to liquids (CTL) projects, using both direct and
indirect methods, despite difficulties in the market and policy environments.

The pressures they face include sharply lower oil
prices and a surge in coal prices, which together can change the economics of
many projects, and policy changes at the national level.

The latest success story took place in North China's
Inner Mongolia. On March 23, Yitai Group announced a successful test run with
its 160,000-tonne indirect CTL facility, producing quality diesel oil and
naphtha.

Based in Jungar Banner, Inner Mongolia, Yitai Group
has an annual output of 100 million tonnes of coal. Its CTL project was approved
by the central government in 2005 and began construction in 2006, with an
investment of nearly 2.7 billion yuan (395 million U.S. dollars).

"The Yitai facility is China's first industrial-scale
CTL line and it means China has made substantial progress in independent
industrialization of coal to oil using the indirect method," said Li Yongwang,
chief scientist of the coal-to-oil task force of the Shanxi Coal Chemical
Research Institute (SCCRI), under the Chinese Academy of Sciences (CAS).

Direct coal-to-oil production involves mixing heavy
oil with coal to produce coal slurry and converting that mix into diesel oil and
other products via hydrocracking. China's Shenhua Group was the first in the
world to achieve industrial-scale direct production.

The indirect technique requires gasifying and
purifying the coal, then adding activators to synthesize diesel oil and naphtha.
Yitai uses this type of technology, as does Lu'an Mining Group.

Before Yitai's project took off, Shenhua -- China's
top coal producer -- conducted trial operations of a 1 million-tonne direct CTL
production line on Dec. 31, producing quality diesel, naphtha and oil. This
trial run made China the only country in the world to have achieved key
technologies for 1 million-tonne-scale direct CTL production.

The trial ended after 300 hours, but Shenhua is
making improvements so it can conduct a 1,000-hour trial next month.

As a key component of the national energy strategy,
the Shenhua direct CTL project, also based in coal-rich Inner Mongolia,
officially kicked off in May 2005.

Also, on Dec. 22, north China's Shanxi Lu'an Mining
Group successfully experimented with a small-scale indirect CTL facility,
developed by SCCRI. It will conduct a trial of its 160,000-tonne indirect CTL
facility in the near future.